The simple mantra of 'buy in a bust and sell in a boom', has paid off for Paul Moore of PM Capital. Photo: Andrew Quilty

About a third of the Absolute Performance Fund's portfolio, which holds only about 20 stocks, is exposed to the recovery in US house prices, said Paul Moore, who founded the fund manager in 1998.

US house prices have been recovering, particularly over the past six months, and that has proven a winner for the fund and its investors.

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"Three or four years ago we said that the US housing was the centre of the financial crisis and Las Vegas was the centre of the housing crisis," Mr Moore said.

"Sometimes you have just got to think simply," he said. "Buy in a bust and sell in a boom."

Mr Moore and Ashley Pittard, the portfolio manager of the fund, travelled to Vegas to look at properties there.

"We had heard about the terrific yields and went to Vegas to follow up an idea," Mr Moore said. "You drive down four-lane highways to see these places, nice suburbs, tree lined and pristine with access to national parks."

There were one-bedroom apartments selling for about $50,000 on gross yields of 15 per cent.

"It sounded too good to be true, but it was true this time."

Then consideration was given to the best way to play the Vegas property recovery. The fund bought shares in US banks with big mortgage lending books that would benefit from a housing recovery, such as Wells Fargo, Bank of America and JP Morgan.

Another stock that fitted PM Capital's investment criteria was Howard Hughes Corporation, a major real estate development and management company based in Dallas, Texas, which was founded by reclusive billionaire Howard Hughes.

One of the company's biggest projects is Summerlin, a planned community on the outskirts of Las Vegas that houses about 100,000 residents and will eventually be home to more than 200,000.

PM Capital's fund also took a position in MGM Resorts International, whose portfolio of gaming, hospitality and entertainment businesses includes casinos in Las Vegas.

Prices of shares in Howard Hughes Corporation have risen to about $110 from about $60 a year ago.

Mr Moore thinks only the first stage of the recovery has been reached.

"When you have a worst-ever [housing downturn], the reality is that it is not going to recover overnight."

The most recent S&P/Case-Shiller Home Price Index shows house prices are still a substantial way from the peak recorded in 2006. From 2006 through until to 2008 there was a 40 per cent drop. Prices were flat until 2012, when they grew by low single digits before accelerating this year.

While Mr Moore would want to dampen expectations of another 63 per cent return for this financial year, he thinks the recovery in US house price will continue for at least another five years, and perhaps another 10 years.

"Over the next five to 10 years we are heading back to a point where it will be 1.5 million [annual] housing starts, from about 600,000 at the trough."